Regular Rate of Pay (RRP) is a payroll concept under the Fair Labor Standards Act (FLSA) which is a federal law that protects workers by setting standards for their overtime pay and other wage-related protections.
The law states that non-exempt employees who work more than 40 hours in a workweek are entitled to overtime pay. Overtime pay for the hours that exceed 40 during a given workweek must be calculated at a rate of at least 1.5 times their “regular rate.”
Note: There are also state-specific overtime laws. Make sure your overtime policies comply with state and local law.
Important: After a regular payroll run, if you change or add earnings—like giving a bonus for an already-paid pay period—we may recalculate the Regular Rate of Pay for the affected weeks. This can result in adjustments or an overtime rate higher than 1.5 times.
Accurately paying overtime is critical for both employer compliance and employee protection under the FLSA.
Complaints/Legal Claims: Employees can file a claim under the FLSA with the Department of Labor (DOL) Wage and Hour Division for up to three years if the violation was willful, and two years if not. Employees can file private actions in court seeking recovery of unpaid overtime, liquidated damages, interest, penalties, and other derivative claims.
Damages: Under the FLSA, employees can be awarded backpay, liquidated damages, fees, and costs in litigation.
Penalties: Employers who willfully or repeatedly violate FLSA overtime requirements are subject to civil penalties of up to $2,451 per violation and willful violations may result in criminal prosecution and fines up to $10,000 and imprisonment up to six months for second offenses.
State Law Claims: In states with regular rate of pay requirements, employees can also bring claims with state agencies or in state courts. Those may carry different or additional causes of action including wage statements, record retention, damages, or penalties.
Record Retention: The FLSA requires that records detailing non-exempt employees’ hours worked and wages paid must be kept for no less than three years from the date of last entry.
Note: The court can use the employees’ accounting of hours worked in the absence of the employer’s record.
An employee’s regular rate is the hourly rate we use to calculate overtime. It includes base pay and eligible extra pay. Extra pay can be given at any point, and if it overlaps with a workweek or pay period, it can change the overtime premium.
If an employee is only paid an hourly wage, their regular rate is the same as that wage. However, if they also earn extra pay in addition to their hourly wage, we use this calculation to convert the extra pay into an hourly rate (see the Federal Regulation on Overtime Compensation).
To find the RRP, divide an employee's total compensation in a workweek by the total hours they worked in that workweek.
Note: Some pay types do not count toward overtime pay. Exclude them from total compensation.
Total Earnings* - Excluded Earnings*
RRP = ------------------------------------
Total Hours Worked*
Below are non-exhaustive examples of earnings that should count (or not) toward overtime pay. If you’re creating an "other" custom earning in Gusto, view a full list of inclusions and exclusions here.
All hourly wages
Non-discretionary bonus (for pre-established incentives, like production)
Commissions
On-call pay
Shift differentials
Piece-rate pay (not supported by Gusto)
Hazard pay
Make-up pay
*Note: Gusto treats the “Correction Payment” field as an included earning.
Cash tips
Paycheck tips
Discretionary bonus (for optional gifts, like holiday or end-of-year bonuses)
Reimbursements (like travel and meal expenses)
Employer contributions to 401K/Healthcare
Profit-sharing
Retirement contributions
Stock options
Equity
Cynthia is a non-exempt employee and is paid $15.00 an hour. One week, she worked 45 hours and earned a $200 non-discretionary bonus. The following week, she worked 44 hours. What is Cynthia’s gross pay for each week?
Week 1 calculation
RRP = ($15 x 45 hours) + $200 / 45 = $19.44
Overtime Premium = RRP * .5 = $9.72/hr
Overtime Pay = $9.72/hr * 5 hrs = $48.61
Gross pay = $675 regular wages + $200 ND bonus + $48.61
Total due: $923.61
Week 2 calculation
RRP = $15.00 (there are no additional includible earnings)
Overtime Premium = $15 * .5 = 7.50
Overtime pay = $7.50 * 4hrs = $30
Gross pay = ($15 * 44 hours) + ($7.50 * 4hrs) = $690
FLSA status
Employee type in Gusto
Eligibility for Gusto's RRP
Non-exempt
Commission only/Eligible for overtime
Eligible if on a weekly, biweekly, or semimonthly pay schedule
Exempt
Commission only/No overtime
Not eligible
To make sure RRP is accurate in Gusto, follow these steps.
Click the Pay section and select Pay settings.
Confirm the Start of workweek for each pay schedule is set to the desired weekday.
Make sure custom earnings are properly categorized to be included in or excluded from overtime pay.
While running payroll, record non-exempt employees’ eligible pay by the week it was earned.
For non-exempt employees with multiple jobs, the regular rate is based on a week-by-week weighted average formula across both jobs.
When you pay an overtime-eligible bonus or missed wages, apply the payment to the correct pay period. This helps us calculate overtime and regular pay correctly.
You can record hours and earnings by week when it’s required to pay overtime accurately—that’s whenever a non-exempt employee works overtime and earns an included pay type.
We recommend that you accurately allocate hours and earnings to stay compliant with labor laws. If you choose not to, we’ll evenly distribute what you enter across all weeks in the pay period, which could result in inaccurate pay and costly fines.
To record hours by week, follow these steps.
While running payroll, go to the employee’s hours table.
Click the cell for the pay type you need to break out by week, like Overtime hrs or Double overtime hrs.
Click Edit.
Enter the hours for each workweek shown in the pop-up window. Expand More hours and earnings to also enter regular hours by week.
Note: If hours were synced from Gusto Time tracking, they'll automatically be recorded in the appropriate week.
If you use Smart Import to upload hours and earnings from a spreadsheet, you can add a “workweeks” column with each week’s date range, along with that week’s hours and earnings. We’ll allocate them to the correct workweek for you, instead of treating your file as one pay-period total. Learn more in Run payroll with Smart Import. This option is available for the same employees who see workweek breakdown today—see Employee RRP eligibility for details.
Certain payroll earning types are automatically set to be included or excluded by Gusto in accordance with the Department of Labor (DOL).
If you’re creating a custom earning, you can select whether that earning should be included or excluded from overtime pay.
New earnings created and saved cannot be recategorized after 30 days. If needed, they can be deactivated and new ones can be created.
When you add included earnings—such as non-discretionary bonuses, commissions, or other qualifying pay—after the original payroll has run, we recalculate the employee’s Regular Rate of Pay (RRP) for that earlier workweek.
If the updated RRP changes how much overtime the employee earned, we create an RRP adjustment in your new payroll. These adjustments help make sure overtime pay stays fair, accurate, and compliant with federal rules.
Before you submit the off-cycle payroll, we clearly display:
Which employees need an adjustment
The adjustment amount
We also prompt you to:
Review the employee’s earning statement for a detailed breakdown
Attribute earnings by workweek, when needed, to keep calculations accurate
You will see RRP adjustments in:
Pay stubs: A clear breakdown of the adjustment and a labeled section for federally qualified earnings
Payroll review/summary: Notifications that appear when new inputs change a past workweek’s overtime
Reports: The Payroll Journal and Employee Hours reports include RRP adjustments and qualified earnings.
RRP must reflect all included earnings for the specific workweek they belong to. When you add qualifying earnings to a past period:
The employee’s total included earnings increase
Their Regular Rate of Pay increases
Their overtime premium for that week changes
We add the difference to the new payroll as an adjustment
Most adjustments are small—often under $5—but they matter for compliance.
If you need help checking which earning types count toward overtime, review our Included vs. Excluded Earnings guidance.
Employee: Amy (non-exempt)
Hourly rate: $10
Hours worked in the week: 43 (3 hours of overtime)
Payroll 1: Original pay
Regular wages: 40 hrs × $10 = $400
Overtime wages: 3 hrs × ($10 × 1.5) = $45
Total paid: $445
Payroll 2: Retroactive bonus
Two weeks later, Amy’s employer adds a $100 non-discretionary bonus for that same week. Because this is an included earning, we recalculate her RRP.
Step 1: Total included earnings
(43 hrs × $10) + $100 = $530
Step 2: New RRP
$530 ÷ 43 hrs = $12.33
Step 3: Updated overtime premium
New premium owed: $12.33 × 0.5 × 3 hrs = $18.49
Premium already paid: $15.00
Adjustment owed: $3.49
Adjustment hourly rate: $3.49 ÷ 3 hrs = $1.16
We add this adjustment as a separate earning line in the off-cycle payroll so Amy receives the amount she is owed.
Q: Does this work for semimonthly pay schedules?
A: Yes. Semimonthly payroll often spans several workweeks, which can create more frequent adjustments. We now support RRP adjustments for semimonthly schedules so overtime stays tied to the correct workweek.